Crop planning budgets for 2014 are showing negative margins for corn, says Jack Davis, SDSU Extension crops business management field specialist.
Based on 2014 prices of $4 corn and $10.80 soybeans; crop margins for corn are negative $35 for corn following soybeans, negative $95 for corn-on-corn acres, and positive $36 for soybeans following corn.
"Using a 150 bushel corn yield for a corn/soybean rotation puts revenues at $600 an acre and total costs at estimated at $635 resulting in negative $35 margin," Davis says. "The corn-on-corn planning budget assumes similar costs and a 10-percent yield drag resulting in 135 bushel yield with revenues at $540 and a negative $95 margin."
Davis says this all results in no incentive for farmers to plant as many acres in 2014 as they did in 2013.
Direct costs as a percent of revenue are 53% for corn in the corn/soybean, 59% for corn in the corn/corn system, and 30% for soybeans.
"The two key direct costs for each crop are seed and fertilizer," he said.
Basically, seed and fertilizer expenses, as a percent of revenue, are at 38% for corn and 20% for soybeans.
"As seed and fertilizer costs are at a higher percentage of revenue, management focus on these two items will pay good dividends," he said. "Land and equipment costs are also key cost items in each of the crops."
With lower commodity prices and near constant costs compared to the past four years, Davis says margins are projected below levels realized during that time.
"Fertilizer costs are the most variable category from year to year, and prices have trended lower for fertilizer during 2013. Corn-on-corn is not as profitable as compared to past years. If a farm experiences yield drags with continuous corn, crop rotations may offer a profitable alternative."
According to the numbers, Davis said the price and yields used in these budgets favor soybeans, also giving incentives to use crop rotations.
"To achieve the greatest return, management time should be spent on cost control and best management practices of key input items," he said.